Helping with all your real estate needs in the Milwaukee and Waukesha county metro area

• Offer to purchase property as-is without inspection.  As your realtor representing you, I can’t recommend doing this and if you do, I have another piece of paper you will have to sign stating you accept the risks.  The reality is however, buying “as-is” is very powerful language to the seller as they do not have to worry about what defects may be found during an inspection.  Another option may be to offer not to ask for any repairs under a specific dollar amount, say $3,000 or $5,000.  This way you still get to do an inspection and have some protection against major defects, so you know what you are getting into.

• Guarantee the appraisal price.  In these days of crazy over asking offers, not all appraisals come in at the offer price.  Nationally 20% of homes appraise low.  Typically, what that means is the seller is going to have to drop their price to match the appraisal.  If the seller received all sorts of offers, especially in a market where the longer you wait the more valuable the property becomes, they may not want to drop the price, meaning you are out.  I have had some success in getting the buyer and seller to split the difference, but what a lot of buyers are doing is saying if they property does not appraise, they will make up the difference, up to $X.  That figure often being $5,000, $10,000 or more.  This is strictly between you and your lender and what you can afford.

• Offer Occupancy.  Closing day can be stressful for sellers who need to close on two properties the same day.  You can offer the seller to stay X number of days free of charge after the closing to make coordinating their move easier.  This doesn’t really cost you much of anything besides time.  Close on a Friday and allow them to stay through the weekend or following Friday is usually all it takes.

• Offer the seller to leave whatever they want behind.  This can be popular with some sellers as it allows them to leave things, they no longer want behind instead of having to arrange a garage sale or junk pickup.  Depending on what they leave (if anything) you may be able to get some cash by buy selling it yourself.  Or it may cost you $500 or so to get a dumpster or junk pickup yourself.

• Another popular step is to offer to pay some (or all) of the sellers closing costs.  The advantage of this is paying seller costs does not count against the appraisal price.  It does however put money in the seller’s pocket because they won’t have to pay those items themselves. Often those costs are not all that much. On a $250,000 purchase price for instance (approximate figures of course) Title closing fee would be $250, Seller title insurance with special assessment letters is $1,125, GAP endorsement is $125, State transfer fee is $750, property tax credit would have been prorated at a daily cost, say $1,350 for a closing in June.  I have seen it offered, but you probably wouldn’t want to offer to pay the broker fee as that could be as high as $15,000.  If you offered to pay all of those first items, they total $3,600 or you could simply say, Buyer to pay $3,600 (or whatever you choose) toward sellers closing costs.  You can see how this can look attractive to the seller.  Of course, when you only have 5% down payment you may not have the cash to do this.  Again, talk with your lender about what your options could be.

• Offer to purchase the home warranty with seller coverage.  You get the warranty coverage at closing but offering coverage for the seller doesn’t really cost you anything extra.  Since a typical closing is 30 to 60 days many sellers may not care about this one, but it is a nice gesture.

• Upon a successful closing the earnest money can be transferred to the seller.  I personally don’t care for this one, but I have seen it done.  It simply means your earnest money isn’t yours and it will not go toward the purchase price.  To me, some of the above ideas area a better way of getting the seller a higher net sale price.  Talk with your accountant first to see if by paying the sellers closing costs you are able to deduct those expenses on your taxes along with your own closing expenses.

• Some like to do “love letters” to the seller, but the state is looking to outlaw them.  Reason being they often include language or pictures that can be considered discriminatory + most sellers really don’t care.  Most sellers simply look for the offer that gives them the best terms for their situation.

 

Anyway, bottom line is, it is all about what the seller will net at closing and finding creative ways to get there and still have the appraisal and bank approve the costs to you.  Cash is king.  If not cash, 20% or more down payment looks good.  We are in crazy times.  In this price point, it is a strong sellers’ market. 

 

We are also in inflationary times, meaning home prices (and everything else) continue to climb.  Historically real estate has followed inflation, meaning this should be an excellent investment for you in the long run.  Even with the run up in prices many investors still believe this is a great time to buy because as inflation rises the value of the mortgage becomes smaller.

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